Funding your startup 2015 Got Startup Meetup Slide April 23, 2015

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  1. 1. FUNDINGYOUR STARTUP 2015 gotstartup?
  2. 2. WherestheMoney? Tappingyourresources Friends&family Crowdfunding AngelInvestors VentureCapital InstitutionalInvestors GovernmentResources SelfDirectedIRAs
  3. 3. TappingYourResources Savings LiquidateAssets SteveJobssoldhisVolkswagenvanandSteveWozniak soldhisprogrammablecalculatortostartApple Computers Creditcards Trytogetzeropercenttransfercreditcards Transferagainbeforeratehike(34%fee) KevinPlank,CEOofUnderArmor,startedhiscompany with$20Kincashand$40Kincreditcarddebt CommercialBanks Loans LinesofCredit
  4. 4. Friends&Family Probablythemostcommonfunding methodforyoungentrepreneurs Walmartwasstartedwith$5Ksaved fromSamWaltonsmilitaryserviceand $20Kfromhisfatherinlaw Risk cancomplicatepersonal relationships Islimitedbypeopleyouknow
  5. 5. Crowdfunding DifferentTypes Rewardsbased Debtbased Donationbased Equityofferingplatforms
  6. 6. RewardBasedCrowdfunding Currentlythemostpopular Venturewillofferrewardtiers fordifferentamountsofmoney pledged SomeVentureswillutilize cappedrewardtiers,pushing funderstodonateearlyinorder togettheirrewardofchoice
  7. 7. RewardBasedCrowdfunding CoolestCoolerRaisedover$13M Kickstarter
  8. 8. RewardBasedCrowdfunding Indiegogo SolarRoadwayshasraisedover$2M
  9. 9. DebtBasedCrowdfunding P2PLoans LendingClub Over$5Binloansissued Slidingscalesbaseduponrisk (about825%) Microfinancing
  10. 10. DonationBasedCrowdfunding Forcharitable/nonprofit organizations Sometimesusedbyindividuals GoFundMe Raisedover$120M Platformtakes5%
  11. 11. EquityOfferingPlatforms RegulationD Investorsmustbeaccredited Tendstobemuchfasterthan Angelfinancing
  12. 12. VentureCapitalists VentureCapitalistsareusuallylargefirms thatinvestinearlyStartups(Ventures)with theirconsiderableresources(Capital) VCsdonotmakemoneyuntiltheVenture hasanIPOorissoldtoanothercompany ThePentagon isplanningonopeninga SiliconValleybasedVClaterthisyear VentureCapitaliststradecapitalfor ownershipequity,inthehopesofcreating alucrativereturn
  13. 13. WhatdoVentureCapitalistsDo? OwnapercentageoftheVenture Aretypicallymoreinvolvedindaytoday activitiesthanotherfundingoptions,with thepossibleexceptionofAngelInvestors VCsareinfluencedbyriskfactors,soitis generallybettertoapproachthemlaterin yourfundingcycles,particularlyifyou haveaninfluentialAngelInvestorbacking you.
  14. 14. SoyouwanttofindaVentureCapitalist SandHillRoadinMenloParkishometo manyofthelargestVentureCapitalists ResearchVentureCapitalistswhohave investedinyourmarketarea.(i.e.Apps, Biomedical,ConsumerGoods,Services) VCstendtohavemarketfocuses,besure tofindthecorrectoneforyou ResearchthepeoplewhoworkatthatVC Perfectyourpitch
  15. 15. AngelInvestors AngelInvestorsareprivateinvestors EssentiallyaonepersonVentureCapitalist Individuals oftenentrepreneurs,although somebandtogether(e.g.KeiretsuForum) RealityTVshowsSharkTankandDragons DenareaboutAngelInvestors ProvideCapitalforaStartupinexchange forconvertibledebtorownershipequity Somehaveorganizedthemselvesinto AngelGroupsorAngelNetworkstoshare researchandpoolcapital
  16. 16. InstitutionalInvestors Amoreclassicaloptioninfunding Banks InsuranceCompanies PensionFunds/HedgeFunds/MutualFunds Thesegroupsinvesttheirpooledfundsinto securities,property,andotherassets. Companiesalsohaveinvestmentfunds
  17. 17. GovernmentResources SBA,seewww.sba.gov FederalGrants,seewww.federalgrants.com
  18. 18. SelfDirectedIRAs 401(k) Someplansallowforloansagainstyour retirementsavings IRAs butprobablynotyourown SelfDirectedIRAs Shouldgetprofessionalassistanceinsetting thisup ConventionalIRAs RothIRAs ThiswasusedbyMaxLevchinofYelp!And PaypaltocreateaROTHIRAthatmaybe worth>$100M Putinvestmentswiththehighestgrowth potentialintoaRothIRA
  19. 19. SoWhendoyouAsk? Whenshouldyoulookforfunding? Imagefromhttps://en.wikipedia.org/wiki/Startup_company#/media/File:Startup_financing_cycle.svg
  20. 20. 5stagesofFunding Whenshouldyoulookforfunding? Imagefromhttps://en.wikipedia.org/wiki/Startup_company#/media/File:Startup_financing_cycle.svg
  21. 21. 5stagesofFunding Themarkethasdefined5stagesof funding. Thesestagesarereachedasthestartup growsandbeginstosucceed Earlierstageinvestorsexpectalarger percentageofthestartupsequity. Someinvestors(suchasVCs)arevery involvedintheevolutionandsuccessof theVenture.
  22. 22. 5stagesofFunding TheSeedStage TheIdeastage Prototypestage ManyInvestorswillconducta FeasibilityStudytoinvestigateideas. HIGHESTRISKSTAGE BestsourcesforSeedFunding: AngelInvestors FriendsandFamily GovernmentFunding CrowdFunding RiskofLoss 66.2%
  23. 23. 5stagesofFunding TheStartupStage Venturehaspassedthefeasibilitytest Companystartsputtingtogetherthe management/foundingteam MarketResearchisconducted BestsourcesforStartupFunding: AngelInvestors VentureCapitalists GovernmentFunding CrowdFunding RiskofLoss 53.0%
  24. 24. 5stagesofFunding TheSecondStage EncountersoftheMarketingKind Productisnowbeingintroducedtomarket Salesarebeginningtohappen. Venturehasnotyetbrokeneven BestsourcesforSecondStageFunding: VentureCapitalists GovernmentFunding CrowdFunding RiskofLoss 33.7%
  25. 25. 5stagesofFunding TheThirdStage Expansionphase Ventureexpandsmarketshare Marketingbecomesveryimportant Attempttocutdowncostsorrestructure Lookintofollowupproducts BestsourcesforThirdStageFunding: VentureCapitalists GovernmentFunding CrowdFunding RiskofLoss 20.1%
  26. 26. 5stagesofFunding TheBridge/PreIPOStage Laststageoffundingprocess Venturehasachievedacertainamountof marketshare Venturemaybeboughtoutinamerger BestsourcesforThirdStageFunding: VentureCapitalists RiskofLoss 20.9%